New IEA report compares the performance of the NHS to that of its European counterparts

Summary:

While in many other policy areas, there is a political appetite for learning from international best practice, healthcare remains the exception: the healthcare debate remains inward-looking and insular. This is exemplified in newspaper headlines such as ‘Can a private business run a hospital?’, which an odd question given that there are thousands of examples from abroad of private businesses doing precisely that.

The UK is far from being the only country which has achieved universal access to healthcare. With the notable exception of the US, practically all developed countries (and plenty of developing countries) have managed to do so in one way or another. But Britain is probably the only country where universal healthcare coverage is still celebrated as if it was a very special achievement.

The NHS is often unduly eulogised for minor achievements, because it is being held to unrealistically low standards. The NHS should not be compared with the state of healthcare as it was prior to 1948, or with a hypothetical situation in which all healthcare costs had to be paid out of pocket. Rather, it should be compared with the most realistic alternative: the social health insurance (SHI) systems of Continental Europe, especially the Netherlands, Switzerland and Germany.

SHI systems are far more market-oriented, competitive and patient/ consumer-driven than the NHS. They show a much greater plurality in both provision and financing, usually with a mix of providers (public, private for-profit and private non-profit) and a mix of payers (for-profit insurance, non-profit insurance, out-of-pocket payments, supplementary insurance). For example, in Germany, fewer than half of hospitals are government-owned.

SHI systems still redistribute from the healthy to the sick, and from the rich to the poor. This happens mostly through risk-structure compensation schemes, which redistribute from insurers with a high proportion of ‘good risks’ to those with a high proportion of ‘bad risks’ and thereby make ‘cherry-picking’ of healthier clients economically unviable. Low-income earners also receive demand-side subsidies to help them pay their health insurance premiums.

SHI countries consistently outperform the NHS on measures of health outcomes, quality of healthcare provision and efficiency. Cancer and stroke survival rates are higher, fewer patients suffer from complications after a hospital operation, and the number of deaths that could have been prevented through better healthcare (‘mortality amenable to healthcare’) is lower. On the latter measure, the UK could avoid at least 14 unnecessary deaths per 100,000 inhabitants each year if it rose to the standards of the SHI countries.

SHI systems do not just outperform the NHS in terms of average outcomes, they also achieve more equitable outcomes. The extensive use of market mechanisms does not have to conflict with the aim of reducing health inequalities. According to reasonable indicators of equity, the performance of the NHS is about average amongst developed countries; the performance of SHI systems are amongst the best in the world.

The only visible advantage of the NHS model over SHI models is that it is better at containing costs. However, part of the difference is explained by the fact that SHI systems make it much easier for patients to top up and/or upgrade statutory healthcare privately if they wish. NHS patients are not allowed to do this.

In the Netherlands, health insurance companies and healthcare providers operate under private law like any other business. ‘Hospitalplanning’ has been largely abolished; the opening and closing, downsizing and expanding of hospitals is no longer a political matter.

In Switzerland, people have genuine freedom of choice between different health insurance policies. They can, for example, choose a deductible of up to CHF 2,500 in exchange for a premium rebate, in which case they have to pay all healthcare costs up to that level out of pocket. People can also voluntarily limit their degree of provider choice in exchange for rebates, by opting into various forms of managed care models.

Germany started a wave of hospital privatisations in the early 1990s. The private for-profit sector now has a market share of about one fifth, and the private non-profit sector accounts for over a third of the hospital sector. There is no evidence that quality of care has suffered, and some evidence that is has actually improved.

This briefing does not claim that abandoning the NHS in favour of a SHI system would solve every problem faced by the health sector. The most important challenges, especially the demographic ones, are actually common to both systems. But the briefing does argue that SHI systems have a number of clear advantages over the NHS model, and that it would be possible for the UK to move a lot closer to a SHI system without giving up on the NHS – or the principles it embodies – in its entirety.

Dr Kristian Niemietz joined the IEA in 2008 as Poverty Research Fellow, becoming its Senior Research Fellow in 2013 and Head of Health and Welfare in 2015. Kristian is also a Fellow of the Age Endeavour Fellowship.
He studied Economics at the Humboldt Universität zu Berlin and the Universidad de Salamanca, graduating in 2007 as Diplom-Volkswirt (≈MSc in Economics). During his studies, he interned at the Central Bank of Bolivia (2004), the National Statistics Office of Paraguay (2005), and at the IEA (2006). In 2013, he completed a PhD in Political Economy at King’s College London. Kristian previously worked as a Research Fellow at the Berlin-based Institute for Free Enterprise (IUF), and at King's College London, where he taught Economics throughout his postgraduate studies. He is a regular contributor to various journals in the UK, Germany and Switzerland.

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